From BHS to Uber: The events that shaped pensions in 2016

The surprise news of Britain's vote to leave the EU and a change of prime minister were the UK's big stories of 2016, but pensions also made the headlines more than once.

As the BHS and Tata sagas unfolded, it became clear these events would have consequences for the wider defined benefit landscape. The Work and Pensions Committee has just ended 2016 with a bang: it has published its report into DB, which suggests tripling fines for negligent employers, reducing recovery plans and valuation periods, and consolidating small schemes under the Pension Protection Fund. 

On the defined contribution side things were no less dramatic, with George Osborne's announcement of a lifetime Isa raising fears over auto-enrolment and, more recently, the debate about gig economy workers and whether they are entitled to employer pension contributions.

Where next for the lifetime Isa?

April 14

In March, then-chancellor George Osborne shocked the pensions industry with the introduction of the lifetime Isa, promising a 25 per cent top-up for under-40s saving towards a house or retirement.

Michael Johnson, pensions expert at thinktank the Centre for Policy Studies and widely seen as the father of the Lisa, said criticism levelled against the Lisa – mainly that it could encourage people to opt out of pensions and thus work against auto-enrolment – could be addressed with a workplace Isa for employer and employee contributions.

“What I’m trying to do is to reduce the risks of opt-out by increasing the flexibility of the contributions that emerge out of the workplace,” said Johnson in a video interview with Pensions Expert.

“I would like to encourage the government to do some parallel planning and envisage the introduction of a workplace Isa in 2018,” he added. 

Will the BHS fallout ring alarm bells across the corporate sector?

May 25

Although much of the coverage of the BHS collapse has focused on a figure of £571m as the black hole facing the roughly 22,600-member BHS schemes, this is a recent estimate of a buyout figure. The latest figure, from 2012, showed a combined deficit of £233m on an ongoing basis.

In 2012, a recovery plan of 23 years was agreed between BHS and the trustees, which many claimed is not only exceptional, but excessive and should have led to intervention from the Pensions Regulator.

Yet that is not necessarily a fair appraisal of the system faced by the trustees.

“Such a long recovery plan is not very common,” said Judith Donnelly, partner at Squire Patton Boggs, “but they do occur where a company says they do not have the money to do it shorter and to do so would lead to liquidation.”

The story is not over yet. That both the Pension Protection Fund and the regulator rejected proposed solutions for the scheme suggests they may have their eye on getting more money.  

Ros Altmann backs Waspi in stinging resignation letter

July 18

One of the last victims of Theresa May’s cabinet reshuffle, Altmann’s position has been changed to parliamentary under-secretary for pensions and taken up by Watford MP Richard Harrington.

Altmann took advantage in her letter of resignation to launch a few parting shots at her former colleagues.

“Unfortunately over the past year, short-term political considerations, exacerbated by the EU referendum, have inhibited good policy-making,” she wrote.

But the peer saved her most interesting criticism for last, seeming to throw her weight behind the Women Against State Pension Inequality campaign.

“I am not convinced the government adequately addressed the hardship facing women who have had their state pension age increased at relatively short notice. They were not adequately informed,” she said.

Altmann fell foul of the Waspi campaign during her time in government for appearing reluctant to back its cause. She has claimed that she was “silenced” by former boss and Brexit campaigner Iain Duncan Smith.  

Select committee sets sights on gig economy

December 2

The Work and Pensions Committee has launched an inquiry into self-employment and the so-called gig economy.

Companies such as transport app Uber have been facing pressure over their workers' conditions, with a recent tribunal decision ruling the drivers are “workers” entitled to the minimum wage and employee benefits such as pensions.

Mark Smith, partner at law firm Taylor Wessing, likened the arrival of the gig economy to “attempts to modernise London’s Victorian transport and sewerage systems”.

“It is not always easy just to tack things on to what is there already,” he said.

Jo Bertram, regional general manager of Uber in the UK, said its drivers valued being self-employed: “The overwhelming majority of drivers who use the Uber app want to keep the freedom and flexibility of being able to drive when and where they want.”  

Cold-calling ban could strengthen scheme powers to block transfers

December 7

Having announced it in the Autumn Statement, the government launched a consultation into pensions fraud and cold-calling in December.

Illustration by Ben Jennings

A complete ban on pensions-related cold calls originating from the UK has been proposed, in recognition of the fact that the majority of scams are initiated by telephone.

Those who breach the ban would be liable to civil lawsuits brought by the Information Commissioner’s Office, which could issue fines of up to £500,000.

While the gist of the proposals was welcomed, many highlighted the omission of digital communication, and the fact that scammers, although no longer allowed to do so in the UK, could easily make cold calls from abroad.

The proposals would mainly serve to alert the general public that there might be foul play when they get cold-called about their pension.

“This is more a wake-up call to the public than the scammers, who are aware of the consequences anyway,” said Malcolm McLean, senior consultant at Barnett Waddingham.

Select committee: Scare negligent employers into funding with 'nuclear' fines

December 21

Just as 2016 was drawing to a close, the Work and Pensions Committee pushed out its report on defined benefit pension schemes, proposing some radical measures to make employers fall into line.

The committee proposed tripling the fines for negligent companies, speculating that this would act as such a powerful deterrent that it would never have to be enforced.

It wants to give trustees flexibility on indexation to make schemes more sustainable. The committee is also asking the government to consult on giving the regulator mandatory clearance powers in corporate activity to protect pension schemes.

Making scheme recovery plans of more than 10 years “exceptional” and shortening valuation periods to nine months are further suggestions the MPs have put forward.

The Pension Protection Fund would manage an aggregator fund for small pension schemes under the proposals, picking up on the consolidation debate initiated by the Pensions and Lifetime Savings Association.

Industry figures warned there could be unintended consequences from the proposals for scheme sponsors, which might find themselves unable to secure credit with such tough requirements on funding pensions.